Enhanced Foreign Corrupt Practices Act Enforcement and US Firms' Foreign Investments

Abstract

This study investigates how the enhancement of Foreign Corrupt Practices Act (FCPA) enforcement after the mid-2000s, which likely had a greater effect on non-US firms, affects US firms’ foreign investment activities. The findings indicate that US firms increase their investments in bribery-prone countries after the enhanced FCPA enforcement. The increase is concentrated in regions where US firms are likely to have already complied with the FCPA or where enforcement more effectively deters foreign competitors, both of which support that more uniform enforcement benefits US firms by reducing competitive pressure. However, the positive effect is significant only for US firms with lower compliance costs or those in a competitive environment. Moreover, enhanced FCPA enforcement enables US firms to take better advantage of investment opportunities and gain a larger market share in bribery-prone countries, which improves their operating performance. Overall, this study sheds light on the positive effect of the FCPA and elucidates the rationale behind the US authorities’ decision to extend the FCPA jurisdiction to foreign firms.

Date of Award	4 Sept 2024
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Yangyang CHEN (Supervisor) & Yue Pan (External Supervisor)